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Abstract

English

What is frustrating for the applied researcher can constitute an interesting result from a theoretical perspective: the fai1ure of all trials to establish a consistent behavioral model of an industry which is estirnable with regard to the avai1able data. And it is exactly this what happens in the study in hand: it is not possible to construct a dual cost or profit function model of the German compound feed industry which is, on the one hand, consistent with economic theory and postulated structural assumptions and, on the other hand, estirnable with regard to missing price and quantity data on factors of production which are no feed components. A particu1ar role in the case of the compound feed industry is played by separability assumptions. These constitute the on1y possibility to justify the neglect of part of the exogeneous variables in estirnating derived behavioral equations. Those separability assumptions which can be maintained plausibly do not suffice to reach such a f! unctional structure. This unpIeasant surprise renders all further considerations normally undertaken in the framework of an empirical analysis of an indust y obsolete. However, prior to the insight that there would not be emerge a consistent model, methodical progress in the theory of flexible functional forms occurred during the project work, and thus the focus was directed towards this area of research. The theory of flexible functional forms is the interface of economic behavioral models and their quantification. The result is twofold: first, with a globally flexible estirnation it is superfluous to require the estirnation function to be locally flexible. Global flexibility is established by serninonparametrical parameter estirnation, i.e. the number of estirnated parameters is deterrnined by the inferential potential of the data alone. Hence, the best possible statistical fit to the sarnple in the whole course of the function is obtained. Secondly, this relaxation in combination with a Bayesia! n estirnation technique with an informative prior distribution allows an implementation of all theoretical consistency properties, at least for a detined regular region, which is impossible with locally flexible functional forms. The applicability is therefore given by a c.p. better statistical significance on the olle hand and a much improved implementation of economic theory with all econometric parameter estirnations going beyond limited, inflexible functional forms like Cobb-Douglas.